Three years of the Foreign Subsidies Regulation: what the Commission’s first review tells us

The European Commission has published its first review of the Foreign Subsidies Regulation (FSR) and accompanying Staff Working Document (SWD) – almost three years after the regulation became operational. The Commission’s headline conclusion is clear: the FSR is “fit for purpose” and has filled an important gap in the EU’s toolbox for addressing distortive foreign subsidies. 

At the same time, the review acknowledges the burden businesses have faced in collecting and reporting foreign financial contributions (FFCs). The Commission is not proposing a rewrite, but it is preparing a targeted simplification. That simplification is welcome but is unlikely to remove the more fundamental concerns that many stakeholders have regarding the proportionality and effectiveness of the FSR.

M&A: active enforcement, persistent filing burden

The FSR concentration regime has been used far more often than expected. The Commission received 273 concentration notifications between October 2023 and May 2026 - roughly three times its original estimate of 30-40 cases per year. Around 97% were closed after preliminary review, without the need for an in-depth investigation. To date, only three cases have proceeded to a detailed review. 

The high preliminary clearance rate explains why stakeholders continue to question the proportionality of the filing burden. The SWD confirms that FFC data collection is resource-intensive, and that current reporting thresholds may capture a significant volume of information that has not, in most cases, proven relevant to identifying distortion risk.  In around 20% of preliminary review cases, no FFCs outside the categories of subsidies considered most likely to distort the internal market were ultimately disclosed.

The same proportionality concern is reflected in the FSR Review Study’s analysis of the concentration thresholds. The Study estimated that raising the EU turnover notification threshold from EUR 500 million to EUR 600 million would have reduced the number of concentration notifications by around 16%, without materially limiting the Commission’s ability to identify potentially distortive subsidies in relevant sectors. Separately, the Commission recognises that the current FFC reporting thresholds - EUR 1 million per individual FFC and EUR 45 million per third country - may require companies to collect and report a significant volume of information that, in most cases, has not proven particularly relevant to identifying a risk of distortion. 

The review also suggests that the system is becoming more workable in practice, even before formal changes are made. Waivers were requested in around 39% of analysed cases, and the median pre-notification phase shortened by 33%, from 36 to 24 working days. The SWD also points to possible simplification for investment fund/private equity cases, where limited partner contributions were generally found to be on pari passu terms and not to confer a benefit.

Public procurement: High volume, uneven compliance

The public procurement chapter has generated by far the largest volume of FSR activity. Between October 2023 and May 2026, the Commission received 5,150 submissions across 863 public procurement procedures. It has opened four in-depth investigations, three of which closed after the relevant economic operators withdrew from the procurement procedure. The Commission presents this as evidence of the FSR’s deterrent effect: withdrawals may indicate that the regime is filtering out operators unwilling to disclose FFC information. 

At the same time, the public procurement data also reveal practical implementation challenges. Compliance appears uneven: after rising from 40% to 70% in the first two years, the share of procurement procedures attracting FSR notifications fell back to 45% by late 2025. The Commission points to awareness gaps among contracting authorities and inconsistent application of the rules, but the figures also suggest that the reporting framework may be difficult to apply in practice.

Those difficulties are compounded by tight timelines and repeat filings. In the FSR Review Study sample, the Commission issued on average 1.75 requests for information per case, with typical response deadlines of around four working days. The 40 most frequent filers accounted for 672 submissions, or 16% of all submissions. The Commission notes that allowing a single submission to be updated twice a year, or using waivers more systematically, could have reduced those submissions by around 76% - one of the clearest examples of a simplification measure that could reduce burden without weakening enforcement.

Finally, the SWD underlines the breadth of the regime. Where the Commission could identify a global ultimate owner, 58% of companies listed in FSR submissions had an EU-based owner, compared with 18% with a third-country owner. Among third-country owners, the most frequent jurisdictions were the United States, the United Kingdom, Switzerland, Japan, Türkiye, China and India. This supports the Commission’s view that the FSR is non-discriminatory in design, while also showing that the reporting burden can affect a broad range of market participants - including EU-headquartered groups and companies with complex international ownership structures.

Ex officio: few cases, high stakes

The Commission has opened two ex officio in-depth investigations so far: Nuctech, concerning threat detection systems, and Goldwind, concerning wind turbines. Both concern alleged support from China and will be important for understanding how the Commission uses the FSR outside the notification-based M&A and public procurement procedures. Nuctech challenged the Commission’s inspection decision and sought interim measures, which were rejected and confirmed on appeal. Goldwind has challenged a request for information, with proceedings still pending at the time of the review. These cases should help clarify the scope of the Commission’s investigative powers and procedural safeguards under the FSR.

The review does not propose changes to the ex officio tool. That is unsurprising: the Commission sees it as a necessary complement to the notification regimes and a way to address potentially distortive subsidies outside the thresholds.

Simplification: Targeted relief at the edges, not a rewrite 

The most important forward-looking element of the review is the Commission’s commitment to consider targeted simplification. The Commission is not proposing to re-write the FSR itself. Instead, it intends to consult in autumn 2026 on procedural adjustments, with adoption expected in 2027.

For concentrations, possible changes include: 

• increasing the turnover notification threshold through a delegated act,
• introducing simplified notification possibilities for specific cases or categories of FFCs,
• moderately increasing FFC reporting thresholds, and
• adding further exemptions for FFCs that are not among the categories most likely to distort the internal market.

For public procurement, possible changes include simpler and clearer forms, a revised waiver framework, clearer limits on reporting FFCs that are unlikely to be distortive, and greater clarity on the rights and obligations of companies and contracting authorities.

The likely direction of travel is therefore not a wholesale replacement of the mandatory notification system. Rather, the Commission appears to be considering a more risk-based filing architecture: fewer or lighter reporting obligations for cases and FFCs that experience suggests are unlikely to raise concerns, while preserving full scrutiny for higher-risk cases. 

What this means for businesses

The review confirms that the FSR is here to stay. 

• For state-owned or state-linked investors, particularly those from jurisdictions that have featured prominently in FSR case practice, the review confirms that the Commission will continue to scrutinise transactions and tenders where foreign subsidies may affect the acquisition process, post-transaction conduct or tender outcome.
• For all businesses, the practical message remains the same: FSR analysis must be built early into transaction and procurement planning. In an M&A context, that means assessing filing obligations, preparing FFC data and considering waivers. In public procurement, FSR obligations must be monitored even where contracting authorities do not clearly flag them, FFC data must be prepared in advance, and short response deadlines are to be anticipated.

The Commission’s first review of the FSR is neither a victory lap nor a mea culpa. It is a cautious endorsement of a young enforcement tool, combined with a promise to make the regime more workable. 

If you would like to discuss what the review and the Commission’s proposed simplification measures may mean for your business, please get in touch with our FSR experts or your usual Freshfields’ contact.